Below is a complimentary Demography Unplugged research note written by Hedgeye Demography analyst Neil Howe. Click here to learn more and subscribe.

Millennials Hit By Back-To-Back Recessions - 9 9 2020 11 00 58 AM

Millennials hit by a second financial crisis may never have a chance to accumulate the wealth of older generations. Already a step behind thanks to the Great Recession and now hit the hardest by COVID-19’s economic fallout, young people are at risk of permanently falling behind. (The Wall Street Journal)

NH: History may end up defining Millennials as a generation bracketed by massive back-to-back economic hits: the Great Financial Crisis (2008-09) and the Pandemic Recession (2020-?).

The first hit first-wave Millennials in their early to mid-20s, and the second is hitting last-wave Millennials at roughly the same age.

WSJ reporter Janet Adamy summarizes some of the economic evidence suggesting that high employment and scarce job openings for young workers have a negative impact on future life prospects that lasts long after--sometimes decades after--the crisis itself has passed.

Since we've covered this topic often, I will simply refer here to NewsWire items we have already written. On the long-term impact of economic downturns on future employment rates and earnings, by age and birth cohort, see "The Bad Luck Class of 2020."

On how Millennials may be affected financially--in their future net worth and in their acquisition of wealth and housing--see "Millennials Face Net Worth Shortfall," "Early-Wave Millennials: Educated, Employed, But in Woeful Financial Shape," and "Tiny House Nation: The Millennial Share of U.S. Real Estate Wealth." The last three pieces BTW were written before the 2020 lockdown hit.

Adamy quotes me in the article for pointing out the obvious parallels between the Millennials and the G.I. Generation (born 1901-24). They have had a similar location in history. The first wave of G.I.s were hit by the Spanish Influenza of 1918-19 and the twin recessions of 1918-19 and 1920-21. And later on, of course, both the first and last wave of the G.I.s were hit by the Great Depression.

As young adults, the G.I.s fell way behind earlier generations in employment, income, and net worth. But later on they were able to make up the loss--and more--with the help of a major "New Deal" political and social transformation that they helped usher in as voters, workers, and soldiers.

Economists often refer to the long-lasting and path-dependent impact of an economic crisis on future employment and earnings as "hysteresis." The word has an interesting (and sexist) origin: In ancient Greek, the word for womb or (in Latin) uterus was "hystera," and it is a synonym for lack or absence. The only recognizable English cognate is hysterectomy.

Anyway, what social scientists are aiming at is the idea that a "lack" of some critical life experience has enduring consequences.

Another often-used word for this is "scarring." For a generation, as for an individual, a bad wound does not heal without changing people in lasting ways. Perhaps the first use of the word in this sense appeared in the title of Caroline Bird's book: The Invisible Scar: The Great Depression, and what it did to American life, from then until now. Her account, written in 1965 when everyone over age 30 recalled the trauma, is wonderfully generational. She explained how the collective personality of America's emerging generation of midlife leaders at that time, beginning with Jack Kennedy and LBJ, had been shaped young by economic scarcity and adversity. And already she foresaw how it was destined to clash with a younger generation, accustomed to affluence, born after World War II.

The opening of her book is worth quoting here at some length:

"It is a curious fact that the Great Depression is in danger of disappearing altogether from the collective consciousness. Already it seems unreal, even to those who lived through it. Did those things really happen? We pinch ourselves. Wasn't it a bad dream?"

"In spite of this tendency, the Great Depression was real, it was awful, and more to the point, it packed a bigger wallop than anything else that happened to America between the Civil War and the Atom Bomb. It had more far-reaching consequences, I happen to think, than either of the World Wars. Nobody escaped. Every individual in every walk of life was hit. What is overlooked and frequently forgotten is this: when the stock market crashed in October 1929, America stopped growing and did not really get moving again until the attack on Pearl Harbor in December 1941 mobilized our resources."

Small-scale economic downturns show up as life cycle blips that can be linked by economists to specific birth cohorts. Large-scale economic downturns shape entire generations in a manner which can subsequently move the entire society in a new direction.

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Neil Howe is a renowned authority on generations and social change in America. An acclaimed bestselling author and speaker, he is the nation's leading thinker on today's generations—who they are, what motivates them, and how they will shape America's future.

A historian, economist, and demographer, Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C., where he helps direct the CSIS Global Aging Initiative.

Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Howe and Strauss' first book, Generations is a history of America told as a sequence of generational biographies. Vice President Al Gore called it "the most stimulating book on American history that I have ever read" and sent a copy to every member of Congress. Newt Gingrich called it "an intellectual tour de force." Of their book, The Fourth Turning, The Boston Globe wrote, "If Howe and Strauss are right, they will take their place among the great American prophets."

Howe and Strauss originally coined the term "Millennial Generation" in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS' 60 Minutes.

Previously, with Peter G. Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform and The Graying of the Great Powers with Richard Jackson.

Howe received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.